The new code of corporate governance for the financial sector, which pegged the tenure of the Managing Director/CEO of a bank to a maximum period of 12 years, has been approved by the Central Bank of Nigeria (CBN) yesterday.
It also pegged the tenure of Deputy Managing Directors/Executive Directors of a bank to a maximum period of 12 years.
The implementation of the new Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria signed by Director, Financial Policy and Regulation Department, Chibuzo Efobi, begins on August 1, 2023.
It directed that where an ED becomes a DMD, a cumulative tenure of 12 years applies and shall not be extended.
It added that the minimum and maximum number of directors on the Boards of Commercial, Merchant and Non-Interest Banks (CMNIBs) shall be seven and 15 respectively.
However, for a Payment Service Bank (PSB), the minimum and maximum number of directors on the board shall be seven and 13.
The reviewed policy directed that: “Where a DMD/ED becomes an MD/CEO of the same bank, his/her previous tenure as DMD/ED is not included in computing his/her tenure as MD/CEO. Remuneration of MD/CEO, DMD, and EDs shall be linked to performance and structured to prevent excessive risk taking”.
It also authorises the board, subject to CBN’s approval, appoint the MD/CEO, Executive Directors as well as senior management staff.
“The Board shall approve a succession plan for the MD/CEO, other EDs and senior management staff, which shall be reviewed at least once every two years,” it stated .
“The Board shall consist of Executive and Non-Executive Directors. The number of Non-Executive Directors shall be more than Executive Directors on the Board and its Committees. Members of the Board shall be qualified persons of proven integrity and shall be knowledgeable in business and financial matters, in accordance with extant Guidelines on competency and fit and proper persons for the Nigerian banking industry,” it stated.
The new policy further mandated that not more than two members of an extended family shall be on the Board of a bank.
“Only one member of an extended family can occupy the position of Managing Director/Chief Executive Officer (MD/CEO), Chairman or Executive Director (ED) at any point in time.”
“Where a merger, acquisition, take-over, or any form of business combination involves the appointment of a director from the Board of the legacy institution, the length of service of such director shall include both the periods served pre and post combination”.
The policy is backed by the powers conferred by the Central Bank of Nigeria (CBN) Act 2007 and the Banks and Other Financial Institutions Act 2020.
The apex bank said that in developing these guidelines, it adapted relevant principles and recommended practices of the Nigerian Code of Corporate Governance issued by the Financial Reporting Council in 2018, global corporate governance practices as well as other related governance codes, circulars and directives made by the CBN.